Project Summary/Abstract Financial incentives, such as pay-for-performance (P4P) programs, are increasingly being used to improve physician behavior. However, the impact of these programs on improving quality of care for patients have been mixed, with some studies showing modest gains and others reporting little to no improvement on quality of care measures. Furthermore, unintended consequences of P4P programs have been demonstrated, including larger financial rewards for those hospitals with higher performance at baseline and significant financial losses for hospitals that serve large minority populations. As of October 1, 2008, Medicare implemented the use of a new financial mechanism-nonpayment for preventable complications (NPCC)-which is a stick rather than a carrot. Medicare no longer pays hospitals for treating certain healthcare-associated infections (HAIs) that arise in patients if they are not present on admission. Our proposed research is unique and timely. There are no evaluations of the impact of NPPC, which is being implemented by one of the largest payers in the U.S. Despite lack of evidence for its efficacy, it is hoped that financial disincentives will motivate hospitals and providers to focus their efforts on reducing HAIs. While the goal is certainly worthy, the mechanism being used to motivate change should be rigorously evaluated to ensure that it achieves its intended consequence without the occurrence of unintended consequences. Our research seeks to understand the impact, both positive and negative, of NPPC on health outcomes and costs. We will assess the impact of Medicare's use of NPPC on outcomes and costs in hospitals that report data to Medicare and the National Healthcare Safety Network (NHSN). Our aims are: (1) To evaluate the impact of NPPC on HAI rates reported by Medicare (i.e. billing rates); (2) To evaluate the impact of NPPC on HAI rates reported by NHSN (i.e. true infection rates); (3) To explore whether NPPC reduces both billing and true infection rates in different types of hospitals (e.g. for-profit vs. not-for-profit) (4) To assess whether reduced reimbursement for HAIs as a result of NPPC disproportionately affects hospitals that care for a high proportion of poor or minority patients.